'Service charge levied by hotels, restaurants should be taxed'

New Delhi: The department of consumer affairs has written to the Central Board of Direct Taxes for the inclusion of service charge levied by hotels and restaurants in the assessment of tax.

"In view of the seriousness of the issue, Department of Consumer Affairs has written to CBDT to consider inclusion of service charge while assessing tax," Minister of Consumer Affairs, Food and Public Distribution Ram Vilas Paswan said in a tweet.

The move comes after the department issued advisories for making service charge voluntary, and restaurants continued to ignore the government's directive.

"We have been pursuing the service charge issue for quite some time now and the department had also issued guidelines, but still some people are not abiding and continue to levy service charge. Especially in five-star hotels, where the amount is very large," an official said.

The department has written to CBDT chairman on Tuesday, saying since hotels and restaurants are taking money from customers, it is part of their income, the official added. "But they don't show it as part of their income, which is basically evasion of tax. This is more of a detrimental take, after continued efforts to stop the practice," the official added.

The department of consumer affairs had earlier this year issued an advisory stating that service charge levied at hotels and restaurants should not be mandatory and ought to be the voluntary basis, depending on the experience of a consumer. The guidelines also mandated that the service charge column be left blank, to be filled by the consumer or to mention on the bill that it is optional.

"I am happy to share that a number of renowned hotels/restaurants have made service charge optional under the guidelines. Complaints against those insisting payment of service charge are being received through NCH (National Consumer Helpline)," Paswan said in a series of tweets.